Altera's results, forecast disappoint

SAN FRANCISCO—Programmable logic supplier Altera Corp. Wednesday (Jan. 23) reported fourth quarter 2012 sales that fell short of analysts' expectations and offered a forecast for the current quarter that also disappointed Wall Street.

Executives from Altera said they believe that the first quarter will represent the bottom of a down sales cycle and laid the blame for much of the disappointing forecast—which calls for sales to further decline 4 to 8 percent in the first quarter—on temporary reductions by European OEMs transitioning to a vendor-managed inventory (VMI) system.

"Some of this decrease is due to a headwind with one specific customer moving to a direct VMI arrangement where we recognize revenue as the customer pulls the inventory," said Ronald Pasek, Altera's chief financial officer, in a conference call with analysts following the quarterly report.

But Ian Ing, an analyst with Lazard Capital Markets, cautioned that it may take longer for Altera's sales to recover.

"While it appears that Q1 is on track to be the bottom, especially as VMI transition headwind ends, we believe the timing and magnitude of the recovery may disappoint as stingy carrier likely continue to spend capex budgets selectively (choosing spectrum acquisition vs. equipment deployments)," Ing wrote in a report circulated earlier Thursday. "We note that LTE deployments in both China and the U.S. are likely required for strong growth in the wireless and wireline markets, suggesting diverse markets need to deploy simultaneously to counter a broadly weak spending environment."

Ing maintains a "neutral" rating on Altera's stock and a price target of $34 on the shares. Altera's stock traded at $33.55 in afternoon trading Thursday, down about 5 percent from Wednesday's closing price.